Trucking Companies Pare Down Their Fleets Amid Tepid Shipping Demand

Big trucking companies have spent the second half of the year shrinking their fleets in hopes of changing an imbalance between the supply of rigs on the road and tepid shipping demand that has flattened industry earnings.They will learn in the coming weeks, as retailers stock up at stores and distribution centers for the holidays, whether efforts to slim down capacity have produced the rate increases that trucking companies say they need to increase profitability and to expand fleets next year.Trucking-industry reports in the coming week will take the pulse of a market at a critical point in the fourth quarter, when companies look to build off momentum in the consumer and manufacturing arenas to set business plans for 2017. Industry data groups ACT Research and FTR are due to report this week on new heavy-duty truck orders for companies in October, a critical month for setting fleet plans for the coming year after several months in which orders have plummeted to historically low levels. DAT Solutions LLC, which measures freight rates in the industrial-trucking market, will report the next week on whether carrier efforts to rein in capacity amid tepid demand are pushing up prices as hoped. DAT says prices for spot-market freight hauls and shipments moving under long-term contracts have been slipping for most of the year, and that rates in September were down 6.4% from the same month a year earlier. “We haven’t seen any difficulty in finding trucks,” said Ken Forster, chief executive of logistics company Sunteck Transport Group, a broker based in Jacksonville, Fla., that finds and books trucks for freight shippers. “It’s clear that overcapacity has driven down pricing.” In quarterly earnings reports this month, Swift Transportation Co., Werner Enterprises Inc. and Covenant Transportation Group Inc. said they have pulled a combined hundreds of trucks from service since the second quarter. Idling trucks is a way large fleets can quickly reduce capacity to match demand, which has stagnated this year amid uneven retail imports and sluggish growth for manufacturers. Swift, the country’s largest truckload carrier, counted 581 fewer trucks in the third quarter than it did this time last year, and plans to cut an additional 200 trucks in the fourth quarter. The company’s fleet tops 19,000 big rigs. Werner, the fifth-largest U.S. truckload carrier, according to SJ Consulting Group, said it cut its fleet by 240 trucks in the quarter ended Sept. 30 from a year earlier. The company posted a 41% drop in third-quarter net profit, to $18.9 million, and said in its earnings statement that it won’t add trucks “until we see meaningful improvement in the freight and rate markets.” Phoenix-based Knight Transportation Inc., whose net profit fell 23% year-over-year in the third quarter to $23.4 million, says the average age of its trucks has grown as the carrier delayed buying new equipment and focused instead on getting more use out of the trucks already in its fleet. Trucking companies have struggled with weak demand this year, with volumes and shipping prices falling while retailers and other businesses work down excessive inventory levels. U.S. domestic truck and rail shipments fell in September for the 19th straight month, according to research firm Cass Information Systems Inc. Still, several companies said they see signs that the downturn in freight demand might have bottomed out. Covenant and Heartland Express Inc.reported year-over-year declines in third-quarter net profit that were smaller than the second-quarter declines. Swift’s net profit improved 4.7% year-over-year in the third quarter, largely because of what the company said were cost cuts and improved efficiency.